Dispersion
What does it mean when two similar assets move in the same direction but by very different amounts?
In plain words
Dispersion is the gap between the returns of two assets over the same period. It measures how far one asset outperforms or lags the other, even when both rise or fall together.
Why it matters
Dispersion separates market-wide moves from asset-specific ones. A portfolio holding both assets experiences only part of each move, and the size of the gap determines whether diversification helps or whether one position dominates the outcome.
In a real week: ETH, week of 3 May 2021
In the week of 3 May 2021, ETH rose 33.05%, beating BTC by 30.11 percentage points, so both moved in the same direction with ETH making the larger weekly move. Hourly correlation between the pair was 0.62, labelled loose. The ETH/BTC ratio changed 29.25%, showing how wide the gap between the two was despite their shared direction.
A common mistake
Reading high correlation as low dispersion. Two assets can move together in direction yet still post a wide gap in weekly returns.